Global Banks Revise Turkish Economic Outlook After Central Bank’s Surprise Rate Hike to 46%

Leading global investment banks have revised their projections for Türkiye’s economy after the Central Bank of the Republic of Türkiye (CBRT) unexpectedly raised its policy rate by 350 basis points to 46%, breaking from a recent easing cycle and signaling a more hawkish stance amid mounting inflation risks and exchange rate volatility.

Rate Hike Signals Policy Pivot Amid Inflation Fears

The move, which also increased the overnight lending rate to 49% and borrowing rate to 44.5%, marks a sharp departure from previous rate cuts and comes amid:

• Rising inflationary pressures

• Dropping FX reserves (now under $150B)

• Ongoing dollarization trends

• Fragile investor sentiment post-Imamoğlu’s arrest and market volatility

CBRT also resumed weekly repo auctions—previously suspended—cementing 46% as its main funding rate.

What Global Banks Are Saying

JPMorgan

• Inflation forecast raised to 30.5% (from 29.5%)

• Sees rate cuts beginning in July, ending 2025 at 38%

• Emphasizes need to maintain positive real interest rates to prevent further dollarization

Morgan Stanley

• Expects no change in June, but a slow easing cycle from July

• Policy rate to fall to 36% by year-end (previously 33.5%)

• Notes cautious return to lira carry trade, but with limited exposure

Goldman Sachs

• Upgrades year-end policy rate forecast to 33% (from 28.5%)

• Potential rate cuts could begin as early as July

• Describes CBRT stance as pragmatic, signaling readiness for more tightening if needed

UBS

• Expresses bearish outlook on Turkish lira

• Highlights reduced FX buffers, growing public disillusionment with austerity

• Warns of weakened carry trade potential

BBVA

• Predicts average funding rate could rise to 49% if pressure persists

• Flags reserve depletion and strong FX demand as structural risks

• Keeps cautious stance due to geopolitical sensitivity and robust domestic demand

Is Yatirim

• Breaks consensus, predicting rate cuts starting in June

• Projects aggressive cuts of 200–300bps per meeting

• Keeps inflation forecast at 30%, with year-end rate at 35%

Market Reactions & Economic Implications

Most analysts view the rate hike as a necessary step to:

• Reinforce monetary discipline

• Contain currency volatility

• Anchor inflation expectations

Despite differing views on timing, banks agree that the CBRT’s communication strategy now signals greater resolve in maintaining a disinflationary path through 2025.